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Investment home

I am planning to buy a town home for rental. The association will have a rental restriciton pretty soon. They are saying if I close before the bylaw changes I should bbe able to rent. 1) I am wondering if there is something that I should consider?  2) Would value of the home go down due to the rental restriction?
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November 13 2012 - Minneapolis
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In My Opinion - I don't think the value of the property will go down to a restriction like that. Townhomes in general don't appreciate well due to similarities to other townhomes. 

I think it depends on what your goal is in this case. Do you want it for the rental income or because you think it'll appreciate. 

I think townhomes are great rentals, but not necessarily great for resale. 

The other thing to consider is if you think the association will be a hassle after you close. 
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November 13 2012
I've seen many cases here in Northern California that have caused the values in a complex to go down because it restricts the ability to sell to investors. In some complexes, first time homeowners/owner occupants maybe restricted if the complex isn't FHA approved as well. When you take out segment of buyers, it can have a negative affect on values and the amount of time it takes to sell. My advise is if you buy, buy for cash flow, not appreciation. 
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November 13 2012
In my opinion, restricting rentals within condo associations would help keep values up. Lenders do not like to lend on condos if there are a lot of rentals within the association. Therefore it's actually harder to finance a condo in an association that allows rentals.

That being said, I wouldn't buy a condo as an investment property. You are too much at the mercy of the condo board changing their rules. ...and I'll second what Russ said. Do not buy for appreciation, buy for cashflow. 

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November 14 2012
You used the word "should" and that always makes me nervous.  I'd get that nailed down in writing so that you will be officially "grandfathered" in under the old rules that allow rentals.

Also keep in mind that some Townhomes in Minnesota are incorporated as Condos and those will have to get special approval for FHA mortgages.  Many do not have approval for FHA.  I think that is a bigger issue and affects the price much more than the rental rule.

Because investors who rent properties tend to purchase properties at lower prices (or they simply don't purchase them at all), the rental restriction generally increases the property values in a well managed association.

I hope that helps!

Patti Ann
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November 30 2012
Rental restrictions would not decrease the value. In a well managed association it would even increase it because you have owner occupants. Don't take anybody's word for it, get it in writing that it will be grandfathered in.
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January 03 2013
If looking you are looking at a rental property for investment reasons, it would greatly benefit you to look for a single family detached property instead of an apartment or townhome. Detached properties sell faster and have better resale values than townhomes do.
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January 07 2013
The value of the town home will generally go up when investors are not allowed in-we buy at below market prices.

If you have an HOA that could eat into your profits a little.  If your are looking for mostly appreciation and are positively geared after tax then you should be fine considering your tenant base/market are steady.
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January 09 2013
 
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